382 JOURNAL OF ECONOMICS AND FINANCE �9 Volume 29 �9 Number 3 �9 Fall 2005

INTRODUCTION TO SPORTS SYMPOSIUM

By Rodney Paul and Andrew Weinbach *

This special section of the Journal o f Economics and Finance focuses on research topics in the area of sports gambling. Recently, judging from the number of publications in the field, there has been a renewed interest in this line of study. This is not surprising, since the study of sports wagering markets brings together wagering, which has long been of interest to economists, psychologists, and researchers of human behavior, and sports, which enjoys seemingly ever- growing popularity. It is an exciting time to work in this field of study because of the rapidly increasing availability and richness of data. Current researchers in the field now enjoy a seemingly endless onslaught of new Interact websites devoted to sports and sports betting with which to analyze the world.

Sports wagering markets offer many avenues for study. Different aspects of the efficient markets hypothesis (EMH), for instance, are easy to test with sports-betting lines or odds and game results. Similar tests in other financial markets may not be feasible for a variety of reasons, including ready availability of data or the presence of systematic disturbances from outside influences. Therefore, tests of wagering markets, with well-defined collections of independent events, each with well-defined beginning and end points, offer a simple alternative laboratory. Effects of "hot-hand" trends, investor biases, and market overreaction to recent events have all been tested within these markets. With the growing availability of more sophisticated data, researchers will now be able to address a variety of questions related to behavioral finance. It should also be pointed out that, to many, the study of sports-betting markets is interesting in its own right. Understanding how the market is organized, how point spreads or odds are set, how and why the point spreads move, and the possible identification of informed a'aders and market timing are all interesting subjects that can further our understanding of how markets work. Careful analysis of these markets may be able to tell us much more about not only markets but agent preferences, tolerance toward risk, and human behavior in general. Current active research in the field includes the use of point spreads, odds, and team records against these figures to provide insight into fan attendance, television ratings, college enrollment and giving, team rankings in college polls, etc. Given our newfound wealth of data, the possible avenues of study within this field are both exciting and potentially far-reaching.

For this special issue, we have brought together a collection of authors who have been important contributors to their own branch of study of sports and sports-betting markets. Their contributions here include insight into a variety of sports markets and their views on the current state of the literature. The first article presented in this special section is written by Woodland and Woodland and is a comparison of the appropriateness of various statistical tests commonly used in the literature, with recommendations for future research. Woodland and Woodland have previously published on the subject of sports gambling in Journal o f Political Economy (1991), Journal o f Finance (1994), Applied Economics Letters (1997), Journal o f Sports Economics (2000), and Southern Economic Journal (2001).

The second paper presented was contributed by Stephen Shmanske, who continues to extend his research on golf by examining the level of efficiency in the relatively new betting market for golf tournaments on the PGA Tour. Shmanske, whose previously published work on the topic of

* Rodney Paul, Assistant Professor of Finance, School of Business, St. Bonaventure University, St. Bonaventure, NY 14778, rpaul@sbu.edu; Andrew Weinbach, Assistant Professor of Economics, Department of Economics, Armstrong Atlantic State University, 11935 Abereom Street, Savannah, GA 31419, weinbaan@mail.armstrong.edu.

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golf includes articles in Atlantic Economic Journal (1992) and Journal of Sports Economics (2000), is also the author of the book Golfonomics (2004).

The third and fourth articles by Rodney Paul and Andy Weinbach continue the authors' study of market efficiency and the presence of bettor biases in sports-betting markets. The third article examines the college basketball betting market and finds that big road favorites cover the point spread more often than predicted by the efficient markets hypothesis. The fourth article tests for bettor bias toward betting the over in totals markets for college and arena football, which has previously been shown to exist in the market for the NFL, NBA, and college basketball. Betting against this bias, by taking the under in expected high-scoring games, is again shown to be profitable in both leagues. While the authors believe that these findings are interesting in their own right, they also believe that these results are pieces of a bigger puzzle and will ultimately further understanding of human behavior and preferences. Paul and Weinbach have previously published articles on the subject of sports-betting markets in Journal of Sports Economics (2002, 2004), Journal of Economics and Finance (2003), and Quarterly Review of Economics and Finance (2004).

The fmal paper in this series is by Raymond Sauer of Clemson University. The purpose of his paper is twofold. First, Sauer takes advantage of newly available real-time wagering data in baseball to examine the swiftness with which markets incorporate new information. Second, Sauer challenges future researchers in the field to further use newly available information not just to test the efficiency of the markets themselves but to forward our understanding of other aspects of sports, markets, and human behavior. Sauer has a long history in the study of efficient markets in sports and has published articles on the subject in Journal of Political Economy (1988), American Economic Review (1993), and Journal of Finance (1993) as well as a thoroughly comprehensive review of the gambling literature in Journal of Economic Literature (1998).

We have enjoyed the process of bringing together the ideas of our authors and are excited about the future of this field. We thank the authors for their contributions and have enjoyed reading their work. We hope that you enjoy this special section of the Journal of Economics and Finance.

References Brajer, V., S. Ferris, M.W. Marr, and Raymond Saner. 1998. "Hold Your Bets: Another Look at the

Efficiency of the Betting Market for NFL Games." Journal of Political Economy 96:206-213. Brown, William, and Raymond Saner. 1993. "Does the Basketball Market Believe in the Hot

Hand?" Comment. American Economic Review 83:1377-1386. Brown, William O., and Raymond D. Saner. 1993. "Fundamentals or Noise? Evidence from the

Point Spread Betting Market." Journal of Finance 48:1193-1209. Paul, R., and A. Weinbach. 2002. "Market Efficiency and a Profitable Betting Rule: Evidence

from Totals on Professional Football." Journal of Sports Economics 3:256-263. Paul, R., and A. Weinbach. 2004. "Efficient Markets, Fair Bets, and Profitability in NBA Totals

1995-96 to 2001-02." Quarterly Review of Economics and Finance 44:624-632. Paul R., A. Weinbach, and C. Weinbach. 2003. "Fair Bets and Profitability in College Football

Gambling. "Journal of Economics and Finance 27:236-242. Sauer, Raymond. 1998. "The Economics of Wagering Markets." Journal of Economic Literature

36:2021-2064. Shmanske, Stephen. 1992. "Human Capital Formation in Professional Sports: Evidence from the

PGA TOUR." Atlantic Economic Journal 20(3):66-80. Shmanske, Stephen. 2000. "Gender, Skill, and Earnings in Professional Golf." Journal of Sports

Economics 1:400--415. Shmanske, Stephen. 2004. Golfonomics. River Edge, New Jersey: World Scientific Publishing

Co., Inc. Woodland, B., and L. Woodland. 1991. "The Effects of Risk Aversion on Wagering: Point Spread

vs. Odds." Journal of Political Economy 99:638-653.

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Woodland, B., and L. Woodland. 1994. "Market Efficiency and the Favorite Longshot Bias: The Baseball Betting Market." Journal o f Finance 49:269-279.

Woodland, B., and L. Woodland. 1997. "Market Efficiency in Gambling Markets Involving Spread: A Corrected and Simplified Test." Applied Economics Letters 4:93-95.

Woodland B., and L. Woodland. 2000. "Testing Contrarian Strategies in the National Football League." Journal o f Sports Economics 1 : 187-193.

Woodland, B., and L. Woodland. 2001. "Market Efficiency and Profitable Wagering in the National Hockey League: Can Bettors Save on Longshots?" Southern Economic Journal

67:983-995.